Gold – Seeking Confirmation After Wedge Break

Gold has been on a good run in October, benefiting greatly from changing market expectations on the first Federal Reserve rate hike, with Fed Fund futures now pricing only a 32% chance of a rise this year.

It has been in consolidation since Thursday but the falling wedge that formed in the meantime is technically a bullish setup, suggesting more gains are to come.

Gold 1hr

Earlier today, it broke above the falling wedge after finding support on the 61.8 fib level – last week’s lows to highs – and now it is in the process of retesting it. If it fails to break back through, it could be seen as confirmation of the break and suggest we’re about to see another leg higher.

Gold 4hr

It is worth noting that after breaking above the falling wedge, it did run into resistance around yesterday’s highs which coincided with the 21-period simple moving average on the 4-hour chart. There has since been a lot of pressure on the top of the falling wedge which suggests to me that it may have been a false breakout.

Under the circumstances, I would like to see further confirmation of the move higher, such as a break above the 21-period SMA or at least a reversal setup on the hourly chart.

If we see either of these then we could see a move back towards Thursday’s high of $1,191.87. Beyond here, $1,206 could be key followed by $1,230, where the descending trend line – 9 May 2013 high – intersects 18 May resistance.

Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.